Overall, our results suggest that investing in secure payments infrastructure can significantly enhance “state capacity” to implement welfare programs in developing countries.
That is from Muralidharan, Niehaus, and Sukhtankar in the latest American Economic Review. Their main result is this:
We find that, while incompletely implemented, the new system delivered a faster, more predictable, and less corrupt NREGS payments process without adversely affecting program access.
Most of all there is lower leakage of benefits, and program participants strongly prefer the biometric arrangements and the accompanying direct cash transfers. The measurements of this paper, by the way, are based on 19 million data points.
I believe the Indian biometric smartcard initiative remains under-discussed and underappreciated. It is actually one of the greatest achievements of contemporary times, based upon the innovative mobilization of the labor of millions in a manner that probably only India could do and that at first sounded quite ridiculous. Scan, record, and use the biometric information of over a billion people, and in a “backward” country at that. Well, they haven’t finished but it is well on track to succeed.
I do worry about the privacy implications of the technology and the data collection, but as it stands today so many Indians don’t have that much privacy in any case.
One broader lesson here is that developing nations are not merely copying and applying the inventions of the West, but innovating on their own. But a lot of their innovations take labor-intensive rather than capital-intensive forms, and thus they do not always look like innovations to our sometimes ethnocentric eyes.